Global oil prices experienced a significant surge on Friday as the United States began enforcing restrictions on Russian crude exports. The implementation of the G7 price cap on Russian oil has raised concerns about global supply, leading market experts to attribute the price jump to Washington’s new sanctions against two shipping companies for alleged violations.
As a result of these developments, the international benchmark Brent crude futures for December delivery surged by over 4% to trade at $89.46 per barrel around 15:40 GMT, while the US benchmark WTI crude also rose by over 4% to $86.34 per barrel. The enforcement of the G7 price cap, which has been in effect since December 5, 2022, led to the increase in global oil prices.
The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) identified two tankers, the YasaGolden Bosphorus owned by Türkiye-based Ice Pearl Navigation Corp and the SCF Primorye owned by UAE-based Lumber Marine SA, for allegedly delivering Russian oil priced above $80 per barrel after the price cap mechanism was implemented. In response, the US placed sanctions on the owners of the ships and designated the vessels as blocked property.
Market analysts also point to the escalation of hostilities between the Palestinian militant group Hamas and the Israeli Defense Forces as a contributing factor to the surge in oil prices. Although the initial price increase resulting from the conflict subsided by mid-week, concerns remain that the situation could worsen. Iranian Foreign Minister Hossein Amir-Abdollahian’s warning on Thursday that Tehran could enter the conflict if the Israeli blockade of Gaza persisted has added to these fears.
Furthermore, the potential involvement of Iran in the Israeli-Hamas war has fueled concerns about destabilization in the Middle East. As the region accounts for more than one-third of global seaborne trade, any further escalation of the conflict could exacerbate the existing oil supply deficit. Bloomberg Economics analysts suggest that crude prices could reach $150 per barrel if these circumstances unfold.
The impact of these developments extends beyond the oil market, as the Middle East plays a crucial role in global trade. The potential destabilization of the region could have far-reaching consequences for various industries and economies worldwide.
In conclusion, the enforcement of the G7 price cap on Russian crude exports and the escalation of the Israeli-Hamas conflict have led to a surge in global oil prices. The US sanctions imposed on two shipping companies for alleged violations and the threat of Iranian involvement in the conflict have further heightened concerns about oil supply and stability in the Middle East. As the situation unfolds, the impact on the oil market and global trade remains uncertain, with potential ramifications for various sectors of the economy.
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